What is a debt-to-income ratio and why does it matter?

Question

Accepted Answer

How to calculate DTI

DTI = (Total Monthly Debt Payments ÷ Gross Monthly Income) × 100

Example: $6,000 monthly income, $2,000 in debt payments (mortgage + car + credit cards + student loan) = 33% DTI.

DTI Range	Lender Reaction	Approval Likelihood
Below 30%	Excellent — best rates	90%+
30%–36%	Ideal — standard pricing	80%–90%
36%–43%	Acceptable — may price up	60%–80%
43%–50%	Tight — alternative lenders only	30%–60%
Above 50%	Most decline	Under 30%

Two ratios apply for Canadian mortgages:

These are tested at the qualifying rate (5.25% benchmark or contract + 2%, whichever is higher).

Pay off small loans first — eliminating a $150 student loan payment can drop DTI by 2–3%
Consolidate high-rate debt — lower payments lower DTI even if balances are unchanged
Increase income — side income, raise, or adding a co-borrower
Don't apply for new credit — every new account adds to the ratio

Use LoanIQ's DTI Calculator to test your ratio after adding the new loan you want — that's how lenders actually evaluate you.